Whistleblower deal Barclays was fined $15 million by the New York Department of Financial Services over CEO Jes Staley’s attempt to unmask a whistleblower at the bank. But Staley — who was fined about $1.5 million by U.K. regulators last May and had his 2016 bonus docked by the bank over the matter — was not fined by New York state. In addition to the penalty, Barclays agreed to a consent order with DFS in which it must submit a detailed plan for a whistleblower program and to improve its oversight of it. Wall Street Journal, Financial Times, New York Times
James "Jes" Staley, chief executive officer of JPMorgan Chase & Co.'s investment bank, speaks during an interview in New York, U.S., on Monday, Dec. 19, 2011. JPMorgan Chase & Co. still views U.S. Treasuries as the world's safest asset and expects that view to continue, Staley said. Photographer: Scott Eells/Bloomberg *** Local Caption *** James "Jes" Staley
Scott Eells/Bloomberg
Still the future? Blythe Masters, the former JPMorgan Chase banker who helped bring credibility to the blockchain industry, is stepping down as CEO of blockchain startup Digital Asset Holdings. Although the move was due to personal reasons, her leaving “comes as the blockchain industry has come under stress lately” as the price of bitcoin and other digital currencies have plunged.
But not everyone agrees digital currencies have had their day. In fact, Brian Brooks, the chief legal officer at cryptocurrency exchange Coinbase, argues in a Times op-ed that the U.S. should embrace them as a replacement for the dollar as a reserve currency. America, he says, “must seize the opportunity to incubate technologies that will enable future digital currencies, which could go on to power a transnational currency — perhaps the best next option for a future global reserve. Committing to this course would provide a check on attempts to supplant the dollar’s role in the global financial system with other sovereign currencies. It would also put the United States at the heart of a more open and equitable financial system. The United States can retain its leadership role in the global financial system — but only if it nurtures the development of the technologies that will underpin its future.”
Widening concerns Malaysia said it is pursuing criminal charges against Goldman Sachs units in the U.K., Singapore and Hong Kong to try to recover money it says it lost in the 1MDB scandal. “The move by Malaysia to target a trio of Goldman’s businesses outside its borders suggests prosecutors seeking redress for the debacle will face tortuous legal proceedings in pressing their case. The charges also cast a wider net over Goldman and its global business, which market experts said could threaten the U.S. bank’s reputation if the charges were to result in prosecution.”
“The immediate consequences of the Malaysian charges against Goldman subsidiaries are likely to be limited, but the action will stir up discussion about how United States prosecutors should proceed and whether they should bring criminal charges against Goldman,” the New York Times writes.
Goldman isn’t the only American bank with problems arising from an Asian fund. Citigroup said it could lose as much as $180 million from an “ill-fated currencies trade” in an Asian hedge fund. As a result of the losses, Sanjay Madgavkar, Citi’s global head of foreign exchange prime brokerage, is leaving the bank. Unlike Goldman’s 1MDB debacle, the Citi losses appear market-related and not the result of possible criminal activity.
Wall Street Journal
Reprieve The Federal Deposit Insurance Corp. formally approved a three-year phase-in of the Current Expected Credit Loss (CECL) accounting rule under which banks would be required to estimate losses on loans as soon as they make them. Publicly traded banks must adopt the rule by 2020 and all other banks the following year, but now will have three years to phase in the impact of the rule on their regulatory capital.
Financial Times
Breaking the glass ceiling Royal Bank of Scotland named Katie Murray as its CFO, “paving the way for it to become the U.K.’s first major bank to have women in its top two executive positions.” Murray has been interim CFO following the departure of Ewen Stevenson to HSBC in October. Alison Rose is the leading internal candidate to succeed CEO Ross McEwan when he steps down after 2019.
Dead wrong The U.K.’s Financial Conduct Authority fined Santander £32.8 million for failing to pass on £183 million to the beneficiaries of over 40,400 deceased customers. The FCA said the Spanish bank also “failed to properly inform the regulator of just how bad the problem was.”
Right on climate change Bank of England Gov. Mark Carney's suggestion that U.K. banks consider the risks from climate change as part of their annual stress tests next year received a thumb's up from the paper. “Lenders are moving slowly because unlike the insurance sector they are less directly exposed to the destructive power of extreme weather,” the paper says. “But they are not immune — and should be paying more heed. The measure should at least help to convince financial sector actors of the potential impact they face from climate issues.” The move, if approved, would be the first such by a major central bank.
Talking banking The biggest banking stories of the week — including the allegations against Goldman Sachs in the 1MDB scandal, and Credit Suisse's advice to customers about moving money out of the U.K. — are discussed in a video.
Quotable
“ABA appreciates today’s acknowledgment by the FDIC that the Current Expected Credit Loss model presents a substantial change to bank accounting and ultimately, the business of lending. Unfortunately, the implementation phase-in approved today does not go far enough to ensure CECL will function as intended.” — ABA President and CEO Rob Nichols.
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
